The comparative financial statements of Triad Images Inc. are as follows. The ma
ID: 2443274 • Letter: T
Question
The comparative financial statements of Triad Images Inc. are as follows. The market price of Triad Images Inc. common stock was $55 on December 31, 2008.
Triad Images Inc.
Comparative retained earnings statement
for years ended december 31, 2008 and 2007
dec 31 2008 dec 31 2007
retained earnings January 1 1,006,500 781,500
add net income for year 430,000 277,500
total 1,436,500 1,059,000
deduct dividends
on preferred stock 12,500 12,500
on common stock 40,000 40,000
total 52,500 52,500
retained earnings dec 31 1,384,000 1,006,500
triad images inc.
comparative income statement
for years ended december 31, 2008 and 2007
2008 2007
sales 3,395,000 3,062,500
sales returns and allowances 35,000 22,500
net sales 3,360,000 3,040,000
cost of goods sold 1,500,000 1,437,500
gross profit 1,860,000 1,602,500
selling expenses 726,000 718,750
admin expenses 486,000 475,000
total operating expenses 1,212,000 1,193,750
income from operations 648,000 408,750
other income 48,000 37,500
696,000 446,250
other expense interest 98,000 50,000
income before income tax 598,000 396,250
income tax expense 168,000 118,750
net income 430,000 277,500
TRIAD IMAGES INC.
comparative balance sheet
december 31 2008 and 2007
2008 2007
assets
cash 132,000 120,000
marketable securities 387,000 157,500
accounts receivable net 260,000 196,500
inventories 425,000 332,500
prepaid expenses 27,500 35,000
total current assets 1,231,500 841,500
Long term investments 319,500 250,000
Prop, plant, equip net 2,575,000 2,000,000
Total assets 4,126,000 3,091,500
Liabilities
Current Liabilities 342,000 285,000
Long term liabilities
mortgage payable, 8% due 2013 600,000
Bonds payable 10%, due 2017 500,000 500,000
Total long term liabilities 1,100,000 500,000
Stockholders Equity
Preferred 2.50 stock $100 par 500,000 500,000
common stock $20 par 800,000 800,000
retained earnings 1,384,000 1,006,500
total stockholders equity 2,684,000 2,306,500
Total liabilities stockholder equity4,126,000 3,091,500
Determine the following measures for 2008 rounding to one decimal place
1. Working capital
2. current ratio
3. quick ratio
4. accounts receivable turnover
5. number of days sales in receivables
6. inventory turnover
7. number of days sales in inventory
8. ratio of fixed assets to long term liabilities
9. ratio of liabilities to stockholders equity
10. number of times interest charges earned
11. number of times preferred dividends earned
12. ratio of net sales to assets
13. rate earned on total assets
14. rate earned on stockholders equity
15. rate earned on common stockholders equity
16. earnings per share on common stock
17. price earnings ratio
18. dividends per share of common stock
19. dividend yield
Explanation / Answer
1.Working capital= Current Assets-Current Liabililties Working capital= 1,231,500 - 342,000= 889,500 889,500 2.Current Ratio = Current Assets/Current Liabilities Current Ratio= 1,231,500 /342,000=3.60 3.6 3.Quick Ratio = Quick Assets/ Current Liabilities Quick Ratio = 806,500/342,000=2.358 2.36 4.Accoounts receivable turnover = sales/Average accounts receivable balance Accounts receivable turnover= 3,360,000/228,250= 14.72 5.Number of days sales in receivables= 365/Accounts receivable turnover Number of days sales in receivable = 365/14.72=24.796 24.8 6.Inventory Turnover Ratio=Cost of goods sold/Average Inventory balance Inventory Turnover Ratio= 1,500,000/378,750=3.96 3.96 7.Number of days sales in inventory= 365/Inventory turnover Number of days sales in inventory=365/3.96= 92.17 8.Ratio of fixed assets to longterm liabilities=Fixed assets/Long term liabilities Ratio of fixed assets to longterm liabilities=2,575,000/1,100,000 2.34 9.Ratio of liabilities to stockholders equity=Liabilities/Stockholders equity Ratio of liabilities to stockholders equity=1,442,000/2,684,000= 0.54 10.Number of times interest charged earned ratio= Earnings before interest and income taxes/Interest expense Times interest earned ratio=696,000/98,000= 7.1 11.Number of times preferred dividends earned= Net income Available to preferred/Annual Preferred Dividends Requirement. Number of times preferred dividends earned =430,000/12,500= 34.4 12.Ratio of net sales to assets= Net sales/Net assets=3,360,000/4,126,000=0.81 13.Rate earned on total assets=Net income + (Interest expense x(1-Tax Rate))/Average total assets Rate earned on total assets= 430,000+(98,000 x (1-0))/3,608,750 Rate earned on total assets= 430,000+(98,000 x (1-0))/3,608,750 0.15 14.Rate earned on stockholders equity=Net income/Stockholders' e quity=430,000/800,000=0.54 15.Rate earned on common stockholders' equity= Net income-Preferred dividends/Average common stockholders equity Rate earned on stockholders' equity=430,000-12,500/2,495,250= 0.17 16.Earning per share on common stock=Net income - Preferred dividednds/Average number of common shares outstanding Earnings per share on common stock=430,000-12,500/40,000= 10.44 17.Price-earning Ratio= Market price per share/Earnings per share Price earning Ratio= 555/10.44=53.16 53.16 18.Dividend per share on common stock=Dividends per share/Earnins per share Ddividend per share =2.5/10.44= 0.24 19.Dividend Yield Ratio= Dividends per share/Market price per share Dividend Yield Ratio= 2.4/555= 0.004